When a change in the price level leads to a change in the quantity of net exports demanded,it is called the ________ effect.
A) international trade
B) export
C) import
D) net export
E) interest rate

Question

Quizplus · Accepted Answer

The international trade effect refers to the impact that a change in the price level has on the quantity of net exports demanded. Specifically, a lower domestic price level will lead to lower prices for exports, making them more attractive to foreign buyers and increasing demand for them. At the same time, a lower price level will lead to increased demand for imports, as they become relatively more expensive. Together, these effects lead to a decrease in the quantity of net exports demanded.

When a Change in the Price Level Leads to a Change